DATE: November 3, 2025
TO: Mayor and Members of the City Council
VIA: Stefan Chatwin, City Manager
FROM: Nate Cruz, Finance Director
DEPARTMENT: Finance
SUBJECT: FY 2024-25 FOURTH QUARTER FINANCIAL UPDATE
RECOMMENDATION
It is recommended that the City Council, by Minute Order, receive and accept the report on the FY 2024-25 Fourth Quarter Financial Update.
EXECUTIVE SUMMARY
FY 2024-25 ended another strong financial year for Foster City, with a net General Fund Surplus of $7.4 million compared to a budgeted deficit of $6.7 million, resulting in an ending fund balance of $71.3 million (110% of FY 2025-26 budgeted expenses). These results were driven primarily by:
Higher revenues from the new Business License Tax structure, Robust interest earnings,
Permit revenues exceeding budget expectations, and
Reduced salary expenditures from position vacancies.
Despite these notable financial results, financial headwinds remain including, transient occupancy tax levels which remain below pre-pandemic levels, high office vacancy rates, and economic uncertainty driven by rapid shifts in federal policy.
Water and Wastewater enterprise funds performed as expected, with sufficient rate- based revenues to cover expenses.
BACKGROUND & ANALYSIS
The table below summarizes General Fund (Funds 001-003) operating results for FY 2024-25. See the attachments for other funds.
Major revenue and expenditure variances included:
1. Property Taxes: Direct real property tax payments performed largely as predicted in FY 2024-25, but Excess ERAF1 is historically difficult to predict and budgeted very conservatively. The positive variance in this category is due to excess ERAF.
2. Property Taxes in Lieu of Vehicle License Fees (VLF): In the 2004 State budget compromise, the State committed to pay local governments property taxes in lieu of diverted VLF revenue under a formula which is tied to minimum school funding. For the past seven years, the State’s available property tax under the formula has been insufficient to pay the amount owed, but the State consistently backfilled this shortfall through additional appropriations until FY2024-25 when 1 Educational Revenue Augmentation Fund (ERAF) refers to property taxes diverted from localities to the state in order to meet minimum education funding requirements. Diverted amount in excess of the minimums are then refunded and referred to as “excess ERAF”.
Ref Amended Budget Actual $ %
1 Property Tax 38,276,460 $ 39,867,073 $ 1,590,613 $ 4% 2 Prop Tax In Lieu of VLF 4,288,848 4,684,953 396,105 9% Sales Tax 4,099,600 4,000,826 (98,774) -2%
3 Transient Occupancy Tax 4,698,500 4,178,480 (520,020) -11% 4 Business License Tax 1,890,000 4,059,057 2,169,057 115% 5 Permits 1,081,140 3,114,475 2,033,335 188%
6 Interest 1,563,900 3,106,680 1,542,780 99%
7 Other 6,038,940 6,604,183 565,243 9%
Total Revenues 61,937,388 $ 69,615,727 $ 7,678,339 $ 12% 8 Personnel Costs 39,319,263 35,080,566 (4,238,697) -11% 9 Supplies & Other 23,548,564 21,321,039 (2,227,525) -9% Total Expenditures 62,867,827 $ 56,401,605 $ (6,466,222) $ -10% Net Revenues (930,439) 13,214,122 14,144,561 *
Net Transfers In (Out) (5,750,000) (5,784,111) (34,111) 1% Change to Fund Balance(6,680,439) $ 7,430,011 $ 14,110,450 $ * Beginning Fund Balance 63,874,456 $ 63,874,456 $ - $ 0% Ending Fund Balance 57,194,017 $ 71,304,467 $ 14,110,450 $ 25% % of Next Year's Expenses 88.1% 109.9%
*Indicates variance percentage is not mathmateically meaningful due to one of the compared figures being negative.
VarianceFY 2024-25
the Governor excluded it from the State’s proposed budget. Therefore, shortfall revenue was not assumed in the City’s budget. A last-minute shortfall appropriation was finally included in the State budget and drove the positive variance in the City’s FY 2024-25 results.
3. Transient Occupancy Tax: The City’s TOT has yet to recover to pre-pandemic levels, suggesting current hotel occupancy and revenue per available room should be considered the new and stable normal. Another factor impacting the variance was the renovation of the Courtyard by Marriott, which temporarily reduced room supply.
4. Business License Tax: In November of 2024 the voters of Foster City approved Measure V which amended the City’s flat tax rate to a progressive tiered system which generated additional revenue. FY 2024-25 budget did not assume this new tax structure.
5. Permits: Permit revenues are highly unpredictable and therefore budgeted at very conservative levels. In FY 2024-25, the budget did not assume revenues from Gilead’s project at 331 Lakeside Drive.
6. Interest Income: Interest earnings in FY 2024-25 were unusually strong, typically exceeding 4%.
7. Other: This category includes fees for franchise taxes, services, facility rentals, and other various revenues. The variance in this category was largely driven by conservatism in the budgeting assumptions.
8. Personnel Costs: Staff costs are budgeted assuming full staffing for the entire FY. Underspending in this category is driven by actual vacancies, which were normal in FY2024-25 compared to most years.
9. Supplies & Other: Under-spending in this category reflects a combination of conservatism in expenditure budgeting and cost savings opportunities which were not assumed in the budget.
This report is intended to provide high level financial information for the City Council, City Departments, and the public. See the attachments for details.
FISCAL IMPACT
There is no fiscal impact associated with the acceptance of this report.
CITY COUNCIL VISION, MISSION, AND VALUE/PRIORITY AREA
Staff Empowerment and Operational Excellence
ATTACHMENTS:
Attachment 1 – Foster City Financial Update FY 2024-25 Q4 Attachment 2 – Changes in Fund Balances
Attachment 3 – Comparison of Budget vs. Actual and Prior Year’s Revenues Attachment 4 – Comparison of Budget vs. Actual and Prior Year’s Expenditures